Americans Love Big SUVs Despite Rising Fuel Prices

A transporter truck loaded with big, gleaming SUVs growled past a station in East Arlington, Texas, selling gas for $3.65 per gallon.

Workers at the nearby General Motors Assembly Plant, where 3-ton Chevrolet Tahoes, GMC Yukons and Cadillac Escalades are built, appreciate the apparent contradiction.

Despite gas prices that guarantee $95 fill-ups on the SUVs, the plant – GM’s only manufacturer of full-size sport utility vehicles – works overtime every week and expects extra hours for at least the next two months.

“February was a very strong month,” said plant manager Paul Graham. “We just haven’t seen any drop (in sales) at this point.”

During the last rapid run-up in fuel prices in 2008, sales of pickups and full-size SUVs plummeted – even in highflying, truck-crazy Texas.

But that price crisis also reshaped the SUV market, forcing casual buyers to flee the once-fashionable segment for more economical vehicles.

The core buyers who remain in the segment, which is about half the size it once was, believe that a large SUV is the only vehicle with the space and towing capability they need.

“In the U.S., we still see size as a value proposition,” said Jessica Caldwell, senior analyst at Edmunds.com, an online source of automotive information. “We just haven’t seen any real drop in people considering full-size SUVs.”

Consumers also view the current rise in fuel prices – prompted mostly by unrest in North Africa and the Middle East – as short-term pain, analysts say.

Most recall how quickly gas prices dropped in 2008 after they helped push the economy into a deep recession.

Spurred by $2,000 incentives, GM’s SUV sales shot up last month, with the Chevrolet Tahoe increasing 52.4% over February 2010, Suburbans up 41.8 % and GMC Yukons up 123%, according to Automotive News.

Arlington’s main SUV, the Tahoe, is rated at 15 miles per gallon in city driving and 21 on the highway.

But that modest economy apparently hasn’t soured consumers on the vehicles.

LeaseTrader.com found in a recent survey that 58% of people who traded full-size SUVs for smaller vehicles during the fuel-price panic of 2008 are back in SUVs.

The online business facilitates the transfer of auto leases from people who want out of a vehicle to someone looking for a similar car or truck.

“We like our big vehicles,” said John Sternal, vice president of marketing communications at LeaseTrader.com. “The more I study the data, the more I honestly believe that you can make all the small cars you want, but you won’t affect consumer behavior until you have $4-a-gallon gas for two years.”

Dallas contractor John Finken says he never thinks about trading his Tahoe for a more economical vehicle.

Finken, a demolition contractor, uses the SUV as his personal vehicle, occasionally pressing it into service to tow an 8,000-pound boat.

“I just prefer them,” said Finken, who owns JF Services Inc. “Even if I didn’t tow a boat, I would drive one. What else has the capability and I still average 17 mpg?”

Last year, the GM Arlington plant – running close to flat-out – built 282,000 full-size SUVs, one of its most productive years. The plant’s 2,300 workers have been on overtime since the fourth quarter of 2009.

“It’s too early to comment on whether production will be that high this year,” Graham said of the plant, which is supposed to work 10-hour shifts Monday through Thursday but often runs five and even six days per week.

“We’re not working any Saturdays now,” he said, “but we are scheduled to work a majority of Fridays” for the next two months.

Most of the plant’s SUVs – and they include the giant Suburban and Yukon XL – are sold in the U.S. and Canada. But 10% to 20% of production goes to buyers in Mexico, South America and the Middle East.

Full-size SUVs have long been viewed as the most vulnerable of vehicles when gas prices get pushed up. Caldwell of Edmunds.com isn’t so sure. She said midsize SUVs like the Toyota 4Runner, Honda Pilot and new Ford Explorer might suffer more defection because buyers in that segment have far more alternatives.

IN THE SPOTLIGHT

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